High on the rooftop of Portcullis House, Liam Byrne’s office reflects the precarious position of the Blairite tasked with Labour’s trickiest policy area — the future of welfare benefits.

It is an isolated spot, cut off from the mainstream, and “a bit dark in bad weather”. The past few weeks have been relentlessly stormy for Byrne, the shadow work and pensions secretary.

He is under fire from Labour’s Left, who demand blanket opposition to Coalition cuts; goaded by Tories who say Labour is funking big questions; and loathed by union leaders such as Len McCluskey, who called for his removal yesterday, saying: “Liam Byrne certainly doesn’t reflect the views of my members. I think some of the terminology that he uses is regrettable and I think it will damage Labour.”

In an exclusive interview with the Standard, the former Accenture business consultant gave the first hint of what could be Labour’s Big Idea on welfare: a radical new use for the billions spent on housing benefit.

“We’ve got to show we are the party that believes in responsible decisions, and decisions that put social security on a long-term sustainable basis,” said Byrne boldly. “There’s nothing Left-wing about leaving big social security liabilities to the next generation. We wouldn’t say it was okay to leave environmental liabilities to the next generation. We should say the same about social security.”

Housing benefit, despite contentious cuts, has soared in cost from £12.6 billion in 2003 to £24 billion now. “Is it a difficult issue? Yes it is. But have we got to make savings, yes we have.” Byrne argues that most of the 71 per cent rise is down to higher unemployment, and the initial step must be to get people into jobs through Labour’s compulsory jobs guarantee. He adds: “But we have also got to look at how we increase the supply of housing.”

His top priority over the next six months, he said, would be “to show how savings can be made on housing benefit by increasing the amount of homes there are for people to go to”. He did not go into details, but a study by the Institute for Public Policy Research has proposed phasing out housing benefit in favour of affordable housing grants to local authorities.

“Billions are spent with private landlords yet we ask nothing in return,” said Byrne. “We are spending £24 billion on housing but hardly building any houses. No wonder rents are soaring. We simply cannot go on like this.”

Byrne, 42, talks in a businesslike manner, reflecting his background. He is quick to laugh (“These days I buy the coffees,” he grinned when reminded of a leaked memo to civil servants setting out hilariously detailed demands for refreshments).

A photograph of him smiling with Tony Blair sits on his shelf, proclaiming moderniser roots. A place-card with his name in Chinese characters reflects the fascination of this former Fulbright Scholar with the economic challenge from the Far East (he has a book coming out in the summer). A bowl inscribed “Minister to Watch” is a reminder of his boy-wonder rise up the ministerial ranks following a 2004 by-election victory.

However, pinning Byrne down on more immediate welfare arguments is like grasping at a wet bar of soap. For example, is a benefits cap of £26,000 per family too high or low on average? “We’re not going to play politics, we would rather get some independent advice,” he sidestepped smoothly.

But the £500-a-week cap has already been imposed in Bromley, Croydon, Enfield and Haringey: are families there being cut too hard, or not enough? “We have just not seen enough evidence,” stonewalled Byrne. He gives a hint of ambition to make the £8.55 London living wage compulsory for public bodies: “We are not quite at that stage yet but it’s an idea we are looking hard at.”

And he confirmed that Labour is looking at making the benefits system reflect people’s contributions more closely. But rather than higher cash benefits — which would cost more — he focuses on employment support for over-fifties who lose their jobs. “Frankly, there’s bugger all there for them,” he said.

Byrne’s caution over spending hardened during his time as Treasury chief secretary. Infamously, however, he left a disastrous note to his successor that read: “I’m afraid to tell you there’s no money left.” It caused uproar, and only last week shadow chancellor Ed Balls muttered darkly on live radio that Byrne would regret the joke “for the rest of his life”. Byrne does not demur. “It was a stupid thing to do,” he said.

Pressed on whether Labour should repeat its 1997 pledge to stick to Tory spending levels after 2015, Byrne deferred to Balls but said the economic circumstances were very different today. “What our economy needs now is a shot in the arm. Growth is draining away.”

Byrne praised Ed Miliband’s leadership repeatedly, saying he had united Labour and put the party back in touch with supporters. The polls, he predicted, would turn against the Tories on welfare in the next few months as cuts in child benefit and tax credits bite. “The real kick in the ribs is only just biting,” he added.

Last year, he decided to quit Westminster to run for mayor of Birmingham — a plan that flopped when the city decided not to have its own Boris. Byrne is philosophical, although the episode may have undermined his standing in the Commons. “Politicians exist to change things,” he insisted. “If there’s an opportunity to shape the destiny of a million fellow citizens, you’ve a responsibility to take it.”

The next six months will put his hopes of reshaping the welfare arguments to the test.